Opinion – Marcos de Vasconcellos: Banks have a wave of revisions in investment recommendations

With the release of the balance sheets for the last quarter, showing the challenging reality that the economy is going through, it is time for investment analysts to rebalance their recommendations. And what we see is that the latest numbers seem to have lowered the market’s adrenaline.

Revenues increased significantly in the vast majority of sectors compared to last year. However, profits fell. In other words: more money came in, but we saw less efficient companies or companies with tighter profit margins than last year, which reduces the growth perspective.

In agribusiness, for example, revenue jumped from R$31.3 billion in the second quarter of 2021 to R$50.7 billion in the same period this year.

The registered profit, however, plummeted from R$ 2 billion to R$ 619 million. In healthcare, while revenue increased by 30.9%, profits fell by 35.1%, according to a study by BTG Pactual, looking at companies listed on the stock exchange. Of the 18 sectors that the bank analyses, 15 had an increase in revenues and 13 had a drop in profits.

The results are not hopeless, but they have led to a wave of revisions in the stock’s target prices, that is, the values ​​to which the shares should reach in up to 18 months, according to the specialists of the big banks and analysis houses.

It even left for Vale. Darling of the market in recent years and surfing the so-called commodity supercycle, with high demand from China, the company “lost points” with analysts. Itaú BBA, Itaú’s investment bank, lowered its recommendation for the company’s shares on the New York Stock Exchange, from “buy” to “neutral”.

The bank’s specialists set the target price for Vale’s shares abroad, for the end of next year, at US$ 15. Today, the price is around US$ 13 and, until then, the perspective of Itaú BBA was for the shares to reach US$ 20 by the end of 2022.

The price reduction was widespread. Bank of America (BofA) maintained its buy recommendation for JBS shares (JBSS3), but reduced the target price from R$67 to R$55. A drop of practically 18% in expectations for the shares, today in house of R$ 32.

Credit Suisse lowered the target price for Raízen’s shares (RAIZ4) from R$8.50 to R$6.50, maintaining a buy recommendation. The papers are currently being traded at around R$ 5.10.

Even PetroRio, whose shares are up 21% this year, took a pruning in analysts’ perspectives. BTG reduced the target price for PRIO3 shares from R$47 to R$37. The oil company’s shares are close to R$24.

construction, the giant Citi started to recommend the sale of EZTec shares (EZTC3), betting that the shares will reach the price of R$ 15. Today, they are traded at around R$ 20.

These are just a few examples from the latest round of price revisions, but they show just how unimpressed analysts at banks and analysts are with the quarter’s results.

The good news came precisely from retail, which was hit so hard in the pandemic, but now it has seen physical stores overcome electronic channels, showing the return of shopping habits to which we were more accustomed.

Taking into account the signaling of face-to-face consumption and the reduction of profits, high-income retail is in the sights of managers, bringing good opportunities in the short term, as it offers high profit margins and depends less on passing on costs to its consumers.